Major African diamond producer Botswana will join Antwerp as an origin certifier of rough diamonds for export to the G7 which banned imports of Russian stones from the start of this year, a joint statement said on Wednesday.
The addition of Botswana looks set to salvage implementation of the ban. The initial system would have seen all diamonds go through Europe’s diamond hub in Antwerp for verification, backed by a new tracing system.
African diamond producers Angola, Botswana and Namibia, as well as diamond miner De Beers, had said the mechanism was unfair and would hurt their economies.
“Botswana and the G7 diamond technical team are now crafting a roadmap to address any identified gaps, aiming to have the export certification node fully operational in Botswana as soon as possible next year,” the statement said.
The Group of Seven (G7) nations ban on direct Russian diamond imports took effect on Jan. 1, followed by a ban on Russia-origin diamonds via third countries from early March.
The tracing system was meant to be up and running by Sept. 1, but the EU delayed the implementation to March 2025.
The diamond industry, once a symbol of timeless stability, finds itself in a state of flux as prices for natural diamonds hit multiyear lows, driven by a mix of evolving consumer preferences, geopolitical upheaval, and the meteoric rise of lab-grown diamonds (LGDs), a new study shows.
The reversal of fortunes that followed a surge during the covid-19 pandemic has left industry stakeholders grappling with how to adapt to ensure long-term sustainability, consultancy McKinsey & Company says in its latest report.
During the pandemic, diamond prices rose unexpectedly. Supply chain disruptions and the delay of weddings initially dampened sales, but many consumers stuck at home turned to diamonds as a form of self-care. This led to an unanticipated spike in demand and a sharp rise in prices.
The post-pandemic market has painted a very different picture. As traditional engagement and marriage cycles return and supply chains normalize, prices have tumbled amid changing market dynamics, McKinsey & Co. says.
Ten years ago, young customers were an important segment of the overall demand for precious stones. Today, they seek more affordable and ethical alternatives.
With prices up to 80% lower than mined diamonds, LGDs have swiftly carved out a substantial share of the market, challenging traditional producers, the report shows.
Shifting customer values
Increased awareness of environmental, social, and governance (ESG) issues has also driven consumers to demand greater transparency and sustainability in diamond sourcing. Many buyers now insist on proof that their diamonds were mined under fair conditions with minimal environmental impact. This shift is particularly pronounced among younger generations, who are reshaping the jewelry market with their purchasing power and values.
Generation Z is leading a wave of change, favouring ethical and customizable products over traditional offerings. Younger buyers are more likely to seek out jewelry that aligns with their values, including fair labor practices and sustainability.
Many are turning to digital platforms for their purchases, with online fine jewelry sales growing significantly. In 2021, the average online purchase of diamond jewellery in the US was $2,204, compared to $2,994 in physical stores, signalling a growing comfort with digital transactions for high-value items.
The trend of self-purchasing is another key shift. Rather than waiting for significant life events like engagements or weddings, many consumers are now buying fine jewelry for themselves.
Industry actors Beers Group and Signet Jewelers launched in October their “Worth the Wait” campaign, aimed at reigniting demand for mined diamonds from youngsters, particularly amid “zillennials”, the microgeneration born between 1993 and 1998.
Geopolitical and gov’t factors
Adding to the industry’s challenges are geopolitical tensions. Sanctions targeting Russian diamonds have disrupted the global supply chain, particularly for larger stones. Russia’s Alrosa, once the world’s top diamond producer by output, has been heavily sanctioned by the US and the European Union, creating regional dislocations.
McKinsey & Company warns that, by March 2025, these restrictions will tighten further, targeting stones of 0.5 carats and above, exacerbating supply chain issues.
The upheaval comes at a time when natural-diamond production is already constrained. Growth in supply is expected to remain sluggish, with an annual increase of just 1–2% through 2027, far below historical trends. Major mining companies are grappling with depleting resources, forcing them to shift from open-pit mining to more expensive underground operations. Companies like De Beers have invested billions to extend the life of their mines, but these efforts are costly and time-consuming.
Government intervention is also reshaping the industry. In diamond-rich regions, including Botswana, public authorities are taking larger stakes in mining operations, emphasizing the need for transparent and sustainable practices.
Despite the challenges, there are opportunities for companies willing to adapt, the consultancy says. Producers can diversify their offerings by incorporating LGDs or recycled diamonds into their portfolios. They can also emphasize the unique, intrinsic value of natural diamonds, appealing to consumers who value rarity and tradition. Investments in sustainability and digital commerce are likely to pay dividends, as consumers increasingly demand ethical and seamless shopping experiences.
The consultants conclude that by embracing innovation and aligning with shifting consumer values, the industry may find a way to shine brightly once more.
G7 countries could oblige companies to affirm that their imported polished diamonds are not of Russian provenance, according to the US’s top sanctions official.
Leaders of the bloc will meet at a summit in mid-May and are looking to have a plan in place by then, according to a member alert the Jewelers Vigilance Committee (JVC) released Tuesday summarizing remarks by Ambassador James O’Brien, who heads the US’s Office of Sanctions Coordination.
“There could be a required declaration that finished diamonds imported to the US and other G7 markets were not originally mined in Russia or other kinds of restrictions that apply to polished diamonds,” O’Brien said, according to the note. “The aim is to ensure this is phased in at a time and flow that will accommodate the work of the industry.”
O’Brien made his comments at last week’s annual JVC luncheon, where he was the guest speaker. The summary contained a mix of direct and paraphrased quotes, wrote JVC president and general counsel Tiffany Stevens.
The G7 includes the US, as well as Canada, France, Germany, Italy, Japan and the UK. The European Union is known as its “eighth member.”
Alrosa, in which the Kremlin holds a stake, “is deeply rooted to the power structure within Russia, and our government wants to make sure its revenue is not available for them to raid,” O’Brien explained. The state is seeking sources of funds to keep the war in Ukraine going, he added.
Important issues to tackle include how long to wait for Russian diamonds that are currently in the market to exit the system, the sizes of stones to which sanctions would apply, and how enforcement will work, the ambassador pointed out. “Having thoughts on these questions that can contribute to a framework in time for the mid-May meeting is a goal of the US government,” he said.
He also said that the US wanted to make sure Burma — also known as Myanmar — didn’t help Russia. The Asian country has been subject to various US sanctions since a military takeover in 2021.
“Russia is going to its allies and asking them to give back military equipment,” the official said, according to the JVC summary. “Burma supports Russia, so the government also wants to make sure Burma is restricted in its sources of revenue, so it doesn’t help Russia as well. This includes ensuring the regime does not earn money from the sale of rubies and other gemstones.”
Two large high-quality diamonds – each larger than 50 carats – were unearthed in Yakutia on December 2, 2022, Bankers Day, “when Russian bankers celebrated their professional holiday,” according to Rough & Polished.
The two stones were extracted at Processing Plant No. 12 from the ore mined at the Udachnaya diamond pipe. One weighs over 67 carats, while the second diamond, a type IIa, weighs more than 52 carats,
Dmitry Amelkin, Alrosa’s Strategy Director, commented: “Finding two of these rare gem-quality diamonds on one and the same day is a unique coincidence. It is symbolic that this happened precisely on the Udachnaya diamond pipe, which has been accompanied by good luck since its discovery.
ussia condemned what it called a push to “politicise” its diamonds over the conflict in Ukraine and said attempts to question its compliance with the international diamond certification scheme were “totally unfounded” and “far-fetched”.
The Kimberley Process, a coalition of governments, the diamond industry and civil society responsible for certifying diamonds as conflict-free, is split over a push by Ukraine and others to expand its definition of conflict diamonds to include those funding aggression by states.
The KP Civil Society Coalition (CSC) and some member states sought to discuss whether Russia’s diamonds were helping to fund the war in Ukraine during a KP meeting in Botswana last week.
“The Russian Federation absolutely condemns the orchestrated attempts of CSC, backed by absolute minority of some Western participants, to politicize the work of the Kimberley Process by deliberately distorting or even openly replacing its basic principles,” Russia’s finance ministry said in an emailed statement. It did not specify which principles it felt were being distorted or replaced.
The CSC did not immediately respond to an emailed request for comment.
The KP defines conflict diamonds as those that fund rebel movements seeking to overthrow legitimate governments, a narrow definition that many have sought to widen since the KP was founded in 2003.
Russia, which was KP chair last year, has “championed” work on revising the definition of conflict diamonds for the past five years, the finance ministry said, and it is committed to continuing talks on the definition.
“We therefore call on our opponents to refrain from further speculative accusations, abstain from political demagoguery and concentrate on the substantive work of the KP,” the finance ministry said.
The KP makes all decisions by consensus and the rift over Russia and Ukraine could jeopardise its effectiveness.
The Natural Diamond Council (NDC) is facing a massive budget cut in 2023 unless the industry steps in to compensate for the loss of Alrosa’s financial contribution, CEO David Kellie told Rapaport News.
“We’ve probably been impacted more than anybody [by sanctions against Russian diamonds] in as much as Alrosa was almost half of our funding,” Kellie said in an interview on Thursday. “I want people to understand that we are facing this financial shortfall, and it’s up to the industry to figure out whether we want to be successful or not.”
Following Russia’s invasion of Ukraine and subsequent sanctions placed on Alrosa, in March the miner suspended its membership of the NDC, which is mandated to promote natural diamonds on behalf of the industry. The company also stepped down from the NDC board and notified that it would cease all financial contributions.
Alrosa accounted for 45% of the NDC’s $70 million annual budget. De Beers contributes an equal amount, and the remaining members — Lucara Diamond Corp., Arctic Canadian Diamond Company, Petra Diamonds, Rio Tinto and RZM Murowa — make up the rest. India’s Gem and Jewellery Export Promotion Council (GJEPC) also contributes.
The loss of Alrosa’s estimated $31.5 million will not affect the NDC’s 2022 budget since it receives funding in advance of its spending plans, Kellie noted. Rather, it impacts the group’s plans going into 2023, “leaving us with a significant challenge for next year,” he stressed. “We need to resolve this by October time to have visibility as to what our strategy will be for next year.”
Now in his third year as NDC CEO, Kellie is appealing to others in the industry to support the organization and enable it to build on the strong growth experienced last year. The jewelry sector saw double-digit growth in 2021, exceeding pre-pandemic levels, by most reports. The spike in demand also had a positive ripple effect on the rest of the diamond and jewelry market.
“I think we’ve proven what we’re capable of doing since launching the Natural Diamond Council, and the impact of consumer demand on our industry,” he explained. “The last year and a half has demonstrated that the whole value chain is dependent on consumer demand.”
The NDC launched in mid-2020, rebranding from the Diamond Producers Association (DPA) as the body responsible for category marketing and driving consumer interest in diamonds. It shifted from a reliance on one central advertising campaign toward continuous content creation suitable for all platforms, particularly social media.
Now, after Alrosa has withdrawn its funding, the NDC needs more stakeholders from the industry to fill the void, Kellie pointed out. A fraction of revenue from various points in the supply chain would massively change the ability of the NDC to drive consumer demand, he noted.
The organization is still considering how companies can contribute, as well as the general appeal it is making, which would have to align with its legal structures and bylaws. Currently, funding could be via a voluntary contribution by corporations or through retail partners investing in their locality by using the NDC’s marketing assets — an avenue that has grown over the past two years, Kellie said.
He is calling on the industry to demonstrate leadership to drive consumer demand for diamonds.
“It’s a case of how we are going to keep this incredible industry moving forward,” he stressed. “My view remains that we are half the size that we should be if we look at the industry as part of luxury and not as a commodity. I would love to continue to drive this industry forward and to build it to what I believe it should be.”
The NDC is currently shooting its 2022 campaign, which will be unveiled around September, ahead of the holiday season. Kellie declined to confirm whether actress Ana de Armas had signed as ambassador for natural diamonds for a third year.
Alrosa canceled its last sale in April and is unlikely to sell any large volumes again this month
Prices are surging in some corners of the rough-diamond market, as sanctions on one of the world’s two giant miners ripple through the supply chain. In the past, the industry could turn to behemoth De Beers to crank out extra gems when supply ran tight — but not this time.
The price of a small rough diamond, the type that would end up clustered around the solitaire stone in a ring, has jumped about 20% since the start of March, according to people familiar with the matter. The reason: Diamond cutters, polishers and traders are struggling to source stones after the US levied sanctions on De Beers’s Russian rival, Alrosa PJSC, which accounts for about a third of global production.
For most of the modern history of diamonds, this is the sort of situation where De Beers could have tapped its vast stockpiles or simply fired up latent mining capacity. Little more than 20 years ago, its safes in London held stocks of diamonds worth perhaps as much as $5 billion.
Those days are now long gone. The company only carries working inventory stocks and its mines are running at full tilt. There is little chance of material increases in supply before 2024, when an expansion at its flagship South African mine will be completed.
“It’s very difficult to see us bringing on any new production,” Chief Executive Officer Bruce Cleaver said in an interview in Cape Town. “Thirty percent of supply being removed isn’t sustainable.”
De Beers also produces relatively few of the type of diamonds Alrosa specializes in: the small and cheap gems that surround a larger center-point stone or are used in lower-end jewelry sold in places like Walmart or Costco.
For many in the sector, that means growing shortages unless Alrosa and its trade buyers can find a work around.
Alrosa canceled its last sale in April and is unlikely to sell any large volumes again this month, the people said. It’s uncertain when the company will be able to sell normally again, they said, even as the company, banks and buyers look for solutions.
Russia may buy an as yet undetermined amount of rough diamonds from sanctions-hit producer Alrosa through its state precious metals and gems repository Gokhran, the country’s Finance Minister Anton Siluanov said on Wednesday.
The United States imposed sanctions on state-controlled Alrosa in April, complicating the Russian company’s operations in the global diamond market, with the aim of cutting off a source of revenue for Russia.
“We do not rule out the possibility of Gokhran purchasing diamonds produced by Alrosa. The amount will be determined later,” Siluanov told reporters.
Gokhran is generally more focused on purchases of precious metals from Russian domestic producers than diamonds, he added.
Alrosa, the world’s largest producer of rough diamonds, was behind about 30% of global output in 2021 and competes with Anglo American unit De Beers.
Its sales, mainly to Belgium, India and the United Arab Emirates, totalled $4.2 billion in 2021.
Gokhran bought diamonds worth $1 billion from Alrosa during years of weak demand caused by the global financial crisis.
Alrosa, the world’s top diamond producer by output, has been hit by fresh sanctions imposed by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC).
The OFAC announced late on Thursday it had placed Alrosa on the Specially Designated Nationals (SDN) list, which effectively kicks a sanctioned company out of the US banking system and bans its trade with Americans.
The measure against the Russian state-owned diamond miner seeks to cut off additional sources of revenue for Moscow, the government agency said.
It also affects any entities in which Alrosa has a 50% interest or more, either directly or indirectly.
The company’s customers well as other counterparties must stop all dealings with the state-controlled Russian miner by May 7, Treasury said.
Shares in the company collapsed on the news, closing nearly 13% lower on Friday trading in Moscow.
Alrosa and its chief executive Sergei S. Ivanov were included in the first wave of restrictions announced by Washington, which restricted the company’s ability to raise new debt and equity in the US.
“These actions, taken with the Department of State and in coordination with our allies and partners, reflect our continued effort to restrict the Kremlin’s access to assets, resources, and sectors of the economy that are essential to supplying and financing Putin’s brutality,” Treasury said in the statement.
The European Union and the UK have also imposed sanctions on the miner following Russia’s invasion of Ukraine.
Diamonds are one of Russia’s top ten non-energy exports by value, with exports in 2021 totalling over $4.5 billion, it noted.
Alrosa is responsible for 90% of Russia’s diamond output and 28% of global supply, with 32.4 million carats produced in 2021 and sales topping $4 billion thanks mainly to consumer demand from the US.
Loopholes Experts have noted the sanctions against the miner carry a significant loophole. Russia’s rough diamonds are sent to another country — usually India — where they are polished and cut, which makes them the product of that nation in the global market.
Another issue is that diamonds of various origins are often mixed once polished, which can make it more difficult for companies that independently vow to stop buying Russian goods.
The Responsible Jewellery Council (RJC), the leading standards organization of the global jewellery and watch industry, took steps into that direction in early April and suspended Alrosa’s membership.
“Fundamentally, we remain focused on RJC’s purpose, which is to ensure all jewellery is responsibly sourced,” the group’s char David Bouffard said in the statement.
World’s top diamond miner Alrosa hit by US sanctions The main markets for Alrosa, which employs about 32,000 people, are the US and Asia (Photo: Dmitry Amelkin, Transformation Director of Alrosa’s Polishing Division. Courtesy of Alrosa | Twitter. ) US-based jewellers Tiffany & Co. and Signet Jewelers said in March they would no longer buy new diamonds mined in Russia.
Alrosa withdrew in March from the Natural Diamond Council (NDC), a market alliance of the world’s leading producers of precious stones. By doing so, the company not only stepped down from the board, but it also cut all financial contributions.
The Mirny, Sakha-based miner also has a 41% stake in Angolan diamond production firm Catoca, which is not affected by the latest US sanctions given the OFAC.
While the full effects of the sanctions on the already undersupplied global rough diamonds market are not yet clear, the Antwerp World Diamond Centre (AWDC) has said there was a chance the restrictions could prove counterproductive.
“It is a blow that should hurt Russia but there is a chance that we do more damage to ourselves,” spokesman Tom Neys told Belgian newspaper Gazet van Antwerpen. “The Russians can easily trade their diamonds with non-EU countries and outside the US.”
The diamond jewelry industry is going into the year with diamond supply at historically low levels, estimated by Bain & Company at 29 million carats in 2021. “Upstream inventories declined ~40%, driven by high demand and slow production recovery, and are near the minimal technical level,”
Russian miner Alrosa has suspended its membership in the Responsible Jewellery Council (RJC), both organizations announced last week.
The development came just over a month after Russia’s invasion of Ukraine. The RJC board of directors voted to accept Alrosa’s decision, the standards groups said Friday.
Alrosa exited the RJC board in early March, but remained a member of the organization. RJC received criticism for not removing the company: Last week, luxury group Richemont and jeweler Pandora both stood down from the organization in protest, while RJC executive director Iris Van der Veken resigned over the issue.
The organization defended itself, noting that it was waiting for the outcome of a legal review.
“Beginning on March 3, the [RJC] board immediately began a comprehensive, third-party legal review to ensure it had the appropriate authority, within its constitutional documents, to take action,” the RJC statement continued. “The law firm selected — having concluded its own standard conflict of interest assessment — commenced their review of RJC’s governance, the board’s authorities, training modules and many other documents and processes.”
Sanctions by the US and UK governments during February and March complicated the situation and delayed completion of the review, the RJC explained. The board received the final document in the middle of last week.
“Taking any action prior to the delivery of the legal opinion would have exposed the RJC to significant legal risk,” it argued.
Alrosa — in which the Russian government owns a 33% stake — confirmed its suspension, saying it cared for the industry “as much as it cares for its mining communities.”
The company “believes in the diamond industry and the people who work to make it great all over the globe,” the statement continued. “We are one of the major contributors to the sustainable development of this industry. We will continue to uphold our highest standards of responsible business conduct and business ethics that are an integral part of our culture and principles.”
